Find safety in U.S. Treasury securities

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A bond, according to Webster's dictionary, is an interest-bearing certificate issued by a government or business promising to pay the holder a specified sum on a specified date.

Bills, notes, and bonds

U.S. Treasury bills, notes, bonds and U.S. savings bonds are excellent, risk-free ways to preserve your principal and, sometimes, get pretty good returns on your money. A wide variety of maturities is available, ranging anywhere from a few days to 30 years.

The government sells Treasury securities -- bills, notes, bonds, and savings bonds. In addition, U.S. Treasury bonds are available on the open market. All of these are debt instruments sold to raise money to operate the government and pay off debt. Treasury securities are safe investments because they're backed by the U.S. government.

The minimum amount required to buy a Treasury bill, note, or bond is $100. Savings bonds can be purchased for as little as $25.

Bonds:

Bills, notes, bonds and savings bonds are risk-free U.S. government-backed investments. They are transferable on the open market. Bonds are sold through competitive and noncompetitive bidding at auction. Bonds and notes pay fixed interest every six months until maturity. Bills mature in a year or less, notes in two to 10 years, and bonds in 30 years. The required minimum for a bill or note is $100; $25 for a bond. Income on Treasuries is exempt from state and local taxes.

Treasury bills (T-bills) are short-term securities that mature in one year or less. You buy them for less than par (face) value. When the bill matures, you receive par value. For example, you might buy a $1,000 26-week T-bill for $985. If

you hold it until maturity, you'll be paid $1,000. That extra $15 is the interest you earned.

When you buy a Treasury note or bond, the price and interest are determined at auction. Both securities pay interest every six months until maturity when you receive the full face value of the note.

If someone cashes a bond before maturity, you can buy what's left of that bond on something called the secondary market. You can do this yourself online if you have a brokerage account with companies such as Fidelity or Schwab, or you can ask a broker to assist you.

Treasury bills and notes are sold through competitive and noncompetitive bidding at more than 200 auctions held throughout the year. Many newspapers report auction schedules. You can also find auction schedules on the government Web site .

Auction dates are announced seven to 10 days before the auction. The Web site also has detailed information on how bids are placed. There are no fees when you buy Treasuries directly from the government.

If you buy Treasuries on the securities market through a broker or dealer you'll pay a commission and perhaps a transaction fee.

The purchase limit in a single auction is $5 million for bills, notes and bonds.

The Treasury sells two savings bonds, the I bond and the EE bond. You can buy them online for as little as $25 at TreasuryDirect, http://www.treasurydirect.gov/ or you can buy paper bonds, for a minimum price of $50, at many financial institutions or through payroll at work. You pay face value and receive interest every six months. The purchase limit is $5,000 electronically and $5,000 in paper bonds per Social Security Number.